Posted on 11/03/2014 10:27:27 AM PST by Citizen Zed
Lost in the translation of Exxon's and Chevron's earnings reports was the surprising strength in their respective refinery segments. The same cheaper oil that crimped earnings upstream allowed wider margins in the downstream business.
There hasn't been a new refinery built in the U.S. since 1976. So operational efficiency is even more important for integrated oil and gas companies that are now facing a weaker price environment for oil and gas. Softer energy prices means integrated companies can also benefit from cheaper oil prices by strategically creating a more economical product mix which may be useful to help lower operating expenses. That's important considering how Wall Street is increasingly focusing on cash flows within the sector.
So are companies now removed from the refinery segment putting too much emphasis/speculation on E&P shale drilling success, considering energy prices are now depressed?
(Excerpt) Read more at thestreet.com ...
Well, there has not been an entirely new refinery built since 1976, and there have been numerous refineries suit down, but there has also been refineries that have been rebuilt, modernized and enlarged to have the capability of refining whatever oil is available at the best price, which also lowers the cost of crude.
there hasn’t been a new refinery in the US since 1976, but many have expanded and all have upgraded constantly. It is generally cheaper and easier to expand an existing plant than make a brand new one. That statistic is misleading. What matters is the amount of refining capacity and the quality of upgrading and maintaining plant and equipment.
That being said, US refining capacity from 1982 - 2014 is flat, but idle capacity is dramatically reduced, and many inefficient plants have been mothballed, profitable plants expanded.
Economic shrinkage for about 40 years. There are those who see it and those who don’t want to see it. It continues, though.
When was the last refinery built in the United States?http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=6
No new big ones, but a few little ones.
Also, some of our single expansions are bigger than most refineries.
Motiva Enterprises has expanded its Port Arthur Refinery (PAR) in Texas by 325,000 barrels per day (bbl/d), taking total capacity to 600,000 bbl/d.
http://www.shell.us/aboutshell/projects-locations/port-arthur.html
And since we refine more than we currently use, it isn’t like we have a refinery shortage.
This is a topic that deserves considerably more thought than a glance at current oil prices.
When you look (as an investor, perhaps) at these huge multinational oils, if you’re at all like me, you have to be phenomenally impressed by their ability to manage vast projects that take 3, 5, 7, 10 years to bring to fruition. Virtually all of which require tens if not hundreds of millions of dollars invested before they return a penny, all of which require multi-level permitting and massive engineering. They have to battle many, many forces arrayed against them yet strongly interested in sucking off their perceived money fountain. What they have to put together is astounding in its complexity. So if oil is low today but high next year but natural gas is low yet fertilizer and petrochemicals plastics feedstocks are high....these are multi-dimensional, multi-variable equations that sometimes span more than a decade to bring to fruition. And for the overwhelming most part, they do an astounding job of it. In case it isn’t clear, their ability to juggle all these factors impresses the hell out of me.
My memory is a little rusty and more so since my fall on concrete on the back of my head, got a concusion from it, anyway, wasn’t there a article here on FR a year or two ago that some company bought a mothballed rusting refinery in Texas and spent money to modernize it a little ?
Closed refinery revived with Eagle Ford crude
http://www.freerepublic.com/focus/f-news/2981758/posts
January 25, 2013
This one?
Yes Thackney, thank you.
I would guess they glad they bought it when they did.
I just saw a article from the Drudge Report from the UK Telegraph about the 4 year ralley of US dollar.
Is the cheaper oil causing the US dollar to rise in value or are there other market factors ?
Also ? Those companies that will be effected in the down turn in the fracking sector of the oil industry benefit from the more purchasing power of the USD ?
The dollar rising is making oil cheaper. You can buy more oil for a higher valued dollar.
As the dollar rises in value, all commodities tend to become cheaper, aside from other market impacts.
I doesn't matter if they are an oil company, hydraulic fracturing service company or any other business.
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